The United States has introduced a 35% tariff on Canadian goods, while President Trump has hinted at implementing a universal tariff between 15% and 20%, a move that surpasses the current 10% rate. This development has stirred uncertainty across global markets. Although specifics regarding Canada's treatment under the USMCA trade agreement remain unclear, the aggressive approach, particularly toward trade partners like Brazil and Canada—both of whom have trade surpluses with the U.S.—raises concerns for the European Union. Meanwhile, the U.S. dollar has gained strength against most G10 currencies, while the Canadian dollar and British pound have weakened. The Japanese yen also slid, driven partly by higher U.S. interest rates. Most emerging market currencies are down, though the Chinese yuan stands out as a notable exception due to a favorable central bank reference rate.

Asia Pacific Markets

In the Asia-Pacific region, currency markets showed mixed reactions. The Japanese yen dipped further after U.S. interest rates climbed, pushing the dollar close to JPY147.20. The yen’s decline was reinforced by an unremarkable 20-year bond auction in Japan and broader weakness in long-dated Japanese bonds.
Meanwhile, the Australian dollar initially surged, reaching a new yearly high above $0.6590 before retreating due to broader U.S. dollar gains linked to tariff concerns. The Aussie settled near $0.6555, close to last week’s level, with support seen slightly lower around $0.6540. These movements highlight the region's sensitivity to both U.S. policy and local bond market developments.

European Markets

The euro briefly dropped to a two-week low near $1.1665 and hovered below the previous day’s close, just above $1.1700. Despite trading both above and below Wednesday’s range, the euro has not closed under its 20-day moving average in nearly two months. President Trump’s forthcoming tariff letter to the EU adds further uncertainty.
In the UK, the British pound remained under pressure after GDP figures showed an unexpected economic contraction in May, following a decline in April. Industrial and manufacturing outputs fell sharply, while services posted a modest rebound. These signs of weakness have increased market expectations of a Bank of England rate cut as soon as next month.

American Markets

The U.S. Dollar Index met a key retracement level near 97.90 and now targets 98.25, with technical resistance slightly higher around 98.30. Despite the federal government’s significant budget shortfall—totaling $853 billion over eight months—tariff revenues are helping offset the deficit. Still, the economic cost of tariffs is evident as prices for imported goods rise, and domestic producers also adjust prices upward. The OECD forecasts a U.S. budget deficit of 7.5% this year, growing to 8.1% in 2026. Speculation about potential leadership changes at the Federal Reserve continues, but historical precedent shows that even a dovish chair could be counterbalanced by the broader FOMC. Meanwhile, markets await the June budget report, expected to show a reduced deficit of around $33–34 billion.